From smartphones, wind turbines, solar power, Chinese companies all have a way to embrace rival technology and become the market’s leading supplier.
Over the years, the Trump administration has always accused China of stealing US trade secrets and intellectual property, according to NYTimes. That was the basis for the US to start a trade war almost two years ago. Since then, tensions have escalated as the two sides imposed hundreds of billions of dollars in taxes on each other’s goods.
On January 15, the first-phase trade agreement was signed by Trump and Chinese Vice Premier Liu He at the White House. In addition to the purchase agreement, China has promised to punish companies that steal US trade secrets and come to lift technology transfer requests with businesses seeking to access the Chinese market.
The Trump administration is concerned that Chinese companies steal technology to compete with American businesses in areas such as software and semiconductors. Despite some clear evidence, China has never acknowledged this.
Leading the field by “joint venture”
Besides directly penetrating the database or hiring spies, US companies say that China seeks to access value-added technology with regulations on cooperation and technology transfer.
Accordingly, China will require foreign companies to set up joint ventures with local enterprises if they want to do domestic business (car manufacturers), or provide the minimum percentage that the components of the products must produce. domestic (wind turbines, solar cells).
Many companies know this is a technique to steal technology but do not dare to speak out for fear of punishment. A group of companies’ representatives insisted that China used a partnership to force foreign firms to disclose secrets. They said Chinese officials pressured foreign businesses to provide confidential information, citing the evaluation process to ensure products are safe for Chinese users.
Renewable energy is one of the areas where China uses this technique to gain valuable technologies.
Gamesa is the Spanish company leading the wind turbine market share in China. By 2005, the Beijing government required 70% of the components in wind turbines to be manufactured in China. Gamesa has trained more than 500 Chinese suppliers to produce all parts for wind turbines, opening an assembly plant in Tianjin. Other wind turbine manufacturers follow this rule.
A few years later, the administration of former US President Barack Obama said that this policy violated the rules of the World Trade Organization (WTO) that China abolished, but everything was too late.
At that time, Chinese businesses produced wind turbines with well-trained suppliers. China is currently the world’s leading wind power producer. Most wind turbines are also made by Chinese companies.
After wind turbines, solar cells have had similar developments. The Chinese government requires that its solar-powered project here have 80% of its components produced domestically, which has led companies to rush to open factories, to cooperate with local businesses to meet regulations. As a result, China is the world’s largest producer of solar electricity (as of 2018).
An increasing anxiety
In the past, there have been concerns about the same thing happening in the automobile sector.
Immediately after opening the door to foreign companies, China organized a competition to select an international car manufacturer to enter the market. The competition will be judged on the basis of automakers’ technology transfer plans for a joint venture company in China.
General Motors beat Ford Motor and Toyota with plans to build a modern assembly plant in Shanghai with dozens of robots to produce new Buick cars. Officials at the German automaker Volkswagen were furious at the competitive pressure that forced them to upgrade technology.
China is currently the largest automobile market in the world. Except for some luxury cars, all cars sold in China are domestically produced.
Does China have a “flip market”?
In a trade agreement signed on January 15, China agreed not to force foreign businesses to transfer technology if they wanted to operate in China, and to punish companies that steal intellectual property. Before signing the agreement, China also pledged to abolish the regulation of establishing joint ventures in areas such as automobiles.
The question is whether China will fulfill its commitments. Some lawyers argue that the provisions of the agreement contain a large loophole that gives Chinese agencies full authority to make decisions in special cases “affecting the country”, “national interests” and Other vague cases.
The US has the right to consult China for 90 days if there are any questions. It also does not cover government subsidies for companies in areas such as solar cells, semiconductors, electric vehicles and future technologies.
The Trump administration is relying on tariffs to deal with that. Part of the agreement will impose tariffs on a number of industries to prevent Chinese rivals from flooding the US market, while prompting companies to reevaluate partnerships with Chinese suppliers to bring forward deals. fit accordingly.